Exclusive: Fidelity preserves income with deep cuts

By Ross Kerber and Aaron Pressman

BOSTON (Reuters) - Operating income at FMR LLC, parent of Fidelity Investments, fell just 7 percent to $1.4 billion in the first nine months of 2009, even as revenues plunged, according to a confidential prospectus obtained by Reuters for a debt offering by the privately held firm.

The results far exceed the performance of the mutual fund operator's largest publicly traded rivals, as all try to weather fallout from the financial crisis and recession.

The entire industry has suffered as management fees plummeted along with the stock market's steep drop in 2008.

But the figures also show the deep cuts Boston-based Fidelity had to make to achieve those results.

Fidelity, which manages some $1.5 trillion, said in the filing that it had slashed expenses, largely through staff cuts.

Two major rounds of lay-offs, along with attrition, trimmed employee headcount in financial services to 38,000 as of June 30, 2009, 16 percent down from 45,200 a year earlier.

"Our company is very healthy and very strong, in large part because we're positioned well with a very diverse business line and because we took steps to manage through an unprecedented worldwide economic crisis," Anne Crowley, Fidelity spokeswoman, told Reuters.

Fidelity's operating revenue for the Jan-Sept 2009 period totaled $12 billion, down from $15.1 billion in the corresponding period in 2008. Operating expenses were $10.6 billion, down 22 percent from $13.6 billion.